Tuesday, July 21, 2015

About Airasia

Before one have negative thoughts on Airasia's operations, lets see some of its perspectives.

It is the largest low costs airline in Asia, yes?

Who in the region is its largest competitor? Lion Air? SIA's bunch of holdings - Scoot, Tiger etc? Why would SIA be interested in a low costs carrier, anyhow?

Who else is able to have partnerships in and multiple hubs in other countries besides Malaysia? Airasia has Thailand, Indonesia, Philippines, India.

Name one business which will make tonnes of money from year one of operations. On this think of Indonesia and Philippines. Is Indonesia esp. a key operations hub for Airasia. If yes, is it important for Airasia to focus on its operations there?

Airline is a tough business. True especially for many American airlines and some national airlines, but some low costs do very well. Check out Southwest, Ryanair, Easyjet.

Is Asia a key growth area for many suitors? Think strategic investors. If no, why did Heineken, (was it) bid extensively for F&N's brewery in Singapore? Why does AEON look at SEA as a key investment destination?

Is there stronger growth in Europe and North America than Asia (especially South East and East Asia)?

Is Airasia better off today than it was say 3 - 5 years ago? Lower oil price (What's the impact of Iran on the price of oil in the future?). Airasia today with better reach. More key partnerships. These are progress. No?

MAS comes to its senses? It needs to turn profitable, now - remember MAS was losing a billion ringgit a year.

2 comments:

- Threat of new entrants: We saw Malindo and FlyMojo suddenly came in and I'm quite sure they are not the last.

- Threat of substitute: Not so much for overseas trips, but locally, we have car, train, bus and potentially, HSR.

- Bargaining power of buyers: It's quite common especially for frequent travelers to open 3 browser tabs, i.e. AirAsia, FireFly and Malindo (sometimes MAS too) when buying tickets for Penang/KL/JB trips. And heck, the Mainland Chinese would suddenly boycott a country for any reason.

- Bargaining power of suppliers: Largest cost components are (1) fuel - totally no bargaining power as it tracks the global prices, and (2) planes (and indirectly, banks) - they better hope for Elon Musk starting a low-cost airplane company soon.

- Intensity of competition rivalry: the worst part of airline business. Spending spending spending on advertisements. Innovation? AirAsia had some but nothing prevent others from copying.

Overall, I believe airline business is one of the worst (if not the worst) investment option out there, and there isn't any punching reason for me to put money into AirAsia either. Anyway, just my 2 cent.

Airline business is the toughest business to go in with so many variables to navigate. For Air Asia, now could be a good entry point but in investment, no one really know. I have made loss from MAS and AAX. Am I going in for AA? That would be a question that I myself yet to be able to answer.

Anyway, I would like to see some safety net this time and that would be its Q2 reports due for release soon.

Disclaimer

The content here should serve as the opinion of the writer rather than as an advice to buy or sell. You should do your own research and/or seek expert's advice when doing your investments. Any decision that you made is your own and the author should not be held accountable.